A Credit Implosion Is Coming

The biggest bubble of all is burstingthe bond market, where companies and the government borrow moneyand it’s twice as big as the stock market, says Lior Gantz of Wealth Research Group.

The yield on 10-year U.S. Treasuries is now twice as high as it was last July.

At 2.46%, today’s investors are lending the largest debtor in the world their own funds for a decade, while official inflation is 2.50%.

High yield investments are hard to find, but this company, for example, yields 8% for years.

The ZIRP (Zero Interest-Rate Policy) and NIRP (Negative Interest-Rate Policy), which central banks worldwide adopted for close to a decade while the credit was deflating from the system, didn’t spark runaway inflation like many investors presumed.

There was too much unwinding of debt, and not even “easy money” policies could spark the attention of the average worker to originate new debt in their name.

But corporations, especially multinational ones, did take advantage of these policies.

Since the economy was sluggish, they wanted to generate “paper profits” by borrowing cheap money and buying back their own shares.

They also issued corporate bonds, which investors swallowed up since they yielded more than government bonds.

U.S. citizens are buying less gold and silver, but in the East, they are seriously afraid of U.S. foreign and domestic policies.

They do not like these swift changes.

I do not trust this rally, and I have not been buying the S&P 500 index companies for a very long time.

Wealth Stocks are what I invest in when I allocate funds for long-term compounding of riches, but our picks have gone up substantially and are above our buy-up prices.

When I look at companies for the long-term, the first analysis is how frugal the management team is.

As it stands, most CEOs are choosing to borrow more, while their companies are earning less.

The fact is that institutional investors are starting to shy away from bonds and will look elsewhere for safety.

The retail investors, who are normally bullish when they shouldn’t be and bearish near bottoms, are exiting gold investments just as the major miners are reporting profits for the forst time in yearsthese are contrarian playbook situations that are coming into fruition.

Smart money is buying gold as the Fed raises rates since they know that real interest rates remain close to zero, and they also know that the Chinese are gobbling up gold.

3-Part Investment Theme

1. Protection: If you haven’t already bought gold or silver coins and bullion, or allocated funds into protective instruments, such as Bitcoin, this is a good time to start, as the U.S. government enters the summer with a debt ceiling debate that might get heated up and send the market to mayhem.

2. Inflation and infrastructure: Consider owning shares of cobalt stocks, which can certainly become top performers in the coming months.

3. Contrarian Gold Stocks: These are literally the most hated investments today, and are therefore one of the cheapest.

A read of 32.14 is very low, and in the coming weeks, Wealth Research Group will be following this in order to make sure that we, the contrarians, will be able to do exactly what the majority is too conditioned not to do: lead, instead of be led.

It does require guts and stamina to be part of the party after you’ve seen a number of funerals, but that’s exactly how people like Rick Rule become multimillionaires.

We’re up big on this zinc play, but this is just the rehearsal before the main eventthis will be a pivotal year.

Lior Gantz, an editor of Wealth Research Group, has built and runs numerous successful businesses and has traveled to over 30 countries in the past decade in pursuit of thrills and opportunities, gaining valuable knowledge and experience. He is an advocate of meticulous risk management, balanced asset allocation and proper position sizing. As a deep-value investor, Gantz loves researching businesses that are off the radar and completely unknown to most financial publications.

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